It does not take an expert in economics to understand the fundamental balance between supply, demand and price. The trucking industry has been said to have a “driver shortage” for a long time now, but if the basic principle of supply versus demand holds, there would be a negative correlation between those employed and the rate per mile for hauling. Does the logic hold?
Trucking was said to have a shortage before the start of 2020, 2020 made it worse. The creation of the Drug and Alcohol Clearinghouse has removed 40,000 drivers of questionable safety off the nation’s roads. The coronavirus pandemic created a short but impactful recession, that’s unemployment numbers made the Great Recession of 2008-2009 look like a minor inconvenience in comparison. Not only did COVID-19 force carriers to let people go, but truck driving schools, a usually very hands-on environment, have often had a hard time adapting and recovering.
With these factors combined, the Bureau of Labor Statistics (BLS) reports August’s 2020 job count to be approximately 80,000 fewer jobs than the same month the year prior.
At the same time, barring the start of the pandemic, freight rates have been rising. Is there a connection? Here is a comparison between freight rates from DAT and job numbers from BLS. For accuracy’s sake, we will go up until August 2020, whereas afterwards the BLS numbers are preliminary and while somewhat accurate, not completely accurate. The mile rates for all three forms of freight (dry van, reefer, flatbed) are averaged.
Here is the data for the last three years:
Using regression on the numbers, we find that an increase of fifty thousand jobs causes a decrease in average freight rate, at about 1.6 cents per mile. For comparison, an increase of merely 1,000 jobs causes a decrease of about .0325 cents.
So this sounds like simple supply and demand: more drivers competing for work, lower revenue per mile. But the data does not stop there: the correlation between the data is -.062. Correlation is a measurement of how well one data set matches another. If each increase of one thousand jobs led to an increase of 10 cents with no deviation, the correlation would be 1. If one thousand jobs did a decrease of 10 cents for each data point, the correlation would be -1. If the numbers were essentially random, the correlation would be 0.
A correlation of -.062 in this sense hints that a higher number of jobs causes lower freight rates, but the hint is so weak as to not even be a whisper.
2020 has been a tumultuous year for everyone, trucking industry especially, so what if we based our results only on the nine data points from this year so far? Doing that:
You can even pinpoint when the pandemic started!
Using linear regression, we find that an increase in 1,000 jobs actually leads to an increase of .08 cents, or a 50,000 increase leading to a 4.12 cent increase per mile.
The correlation for job numbers versus freight rates in 2020 is .23. This details a more consistent pattern than using the past three years, but it is still a weak correlation nonetheless.
Statistics can be misleading. Based on the data here, you may be inclined to believe that hiring more truckers would lead to higher freight rates, or you might believe it has no impact and if any, negative on freight rates.
The data are much more complicated than that. For example, it is likely people are becoming truck drivers in late 2020 due to higher freight rates rather than hiring more people will make the rate rise. There is also a third component we did not measure in these graphs: demand. Freight rates rising could just as easily point to an increase in demand for consumer goods as it could a fall in a supply of truckers.
Supply and demand are negatively correlated: for both rates and supply to go up, demand would have to be skyrocketing, so much so that the influx of truckers could not keep up. This appears to be the case in late 2020 after the initial shock of the pandemic, with its quarantines and shutdowns.
In short, we conclude that the changes in freight rates throughout 2020 have had much, much more to do with changes in consumer demand than it had to do with the trucker shortage. Can fewer truckers lead to higher prices? Almost certainly; if half of the nation’s truckers went on strike tomorrow the freight rates would skyrocket. The data collected here, however, suggests that changes in demand fluctuate more greatly than supply of truckers, and as a direct result, has a greater influence on the change in freight prices.
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